Cash out refi to avoid capital gains

[Chris Igard]

I have two scenarios I’d love some advice on.

1. I have a home I purchased 14 months ago for 475k. Someone made an offer I could not refuse for $725k. I owe 225k on the property. We close in 17 days. I was curious if could do a cash out refi for $500k and reduce the capital gains that I’m on the hook for. Is that doable? I heard this is possible on a radio show.

2. I have another home that we owe $235 on. 29 years @ 3.15 interest it’s would sell for $450-500k. I was thinking of doing a cash out refi on this place because I also have a pool loan for $48k @ 11 years with 7.8 percentage. The house is a monthly cost of $1700 and the pool is $550. I’m hoping to reduce the amount down from $2200 to $2300 a month to $2k per month if possible. Thanks for all the information.

[Bill B.]

You’re probably going to owe 15% on the $725k minus closing costs minus your purchase price. Call it $30-$40k. You’re not going to qualify for any tax free gains because even if it was your primary home you didn’t live there for 2 years. If this is your primary you’d be better off not selling and waiting 10 months. You’d save at least $30k in taxes, basically being paid $2500/mo to live there. If it’s a rental you might as well sell, you’re going to owe the taxes anyway. 

I wouldn’t bother with the refi on home #2 I’d just take some of these proceeds and pay off the pool loan  

Stop listening to any radio show that says your loan balance has anything to do with your taxes, they should be removed from the air.